gathered for another strategy meeting. We decided to raise the Seven-S framework we had drafted a year earlier and asked for evaluations, including suggested changes. Almost immediately, the two skeptical leaders jumped into the conversation. “Don’t change anything,” one of them said. “We love these values. They really work! People like doing business with us. I think it’s because they trust us.” They were nonplused when I responded with a downcast face and silence. “What’s wrong, Dennis? We think this stuff is great. People like to do business with us because of fairness and integrity.”
“I think you have missed a most important point,” I said. “We are trying to live these values because they are right, not because they work.” High ethical values rarely conflict with pragmatic economic behavior. However, this does not mean that economics should be the reason or motive the organization undertakes to live the shared values. Amar V. Bhide and Howard H. Stevenson explained why in a Harvard Business Review article titled “Why Be Honest if Honesty Doesn’t Pay?” They wrote: “There is no compelling economic reason to tell the truth or keep one’s word—punishment for the treacherous in the real world is neither swift nor sure. Honesty is, in fact, primarily a moral choice. Business people tell themselves that in the long run they do well by doing good. But there is little factual or logical basis for this conviction. Without values, without basic preference for right over wrong, trust based on such self-delusion would crumble in the face of temptation. … And for this, we should be happy. We can be proud of a system in which people are honest because they want to be, not because they have to be.”
Why it’s important to live values and how we judge their efficacy were recurring questions inside and outside the company for 20 years. They were also the source of many disagreements between me and some AES board members and managers, not to mention students of management outside the company.
Related to the question of whether we should adhere to values simply because they are right is whether values should change when circumstances change. Should we adjust our interpretations of principles when the stock price goes down or our product doesn’t sell well or we make a mistake on an acquisition? My answer has been no, but it is a no that remains open to further examination and new insights.
I believe there is a transcendent truth behind principles like integrity and justice that does not and should not change over time and should certainly not be adjusted because of economic setbacks. Adjustments in definition and interpretation should take place only when we gain new understanding of the truth. Our understanding of the values may change with time, but the values and principles themselves are timeless. As an old rhyme puts it, “Methods are many, principles are few. Methods change often, principles never do.”
“Methods are many, principles are few. Methods change often, principles never do.”
There is little disagreement that the corporate values at AES arose out of the personal values of the co-founders. The transformation of personal values to organizational values is accomplished with the word “shared.” Shared implies that members of an organization agree on the definition and importance of a value. Sharing values, especially in a secular company, can run afoul of the popular view in our society that people should decide for themselves how values are to be interpreted. If individuals, whether they are vice presidents or board members, interpret values individually, the values are not shared.
We attempted to mitigate this problem through an extensive written and oral orientation for prospective employees before they joined AES. We discussed and defined our values so people could decide whether they wanted to be a part of the AES community. Discussions of our values continued at monthly and quarterly business review meetings. The company’s insistence on articulating its values in all types of settings mystified outsiders. A banker who worked with us expressed amazement at his visit to AES headquarters. “I went by an office and two VPs were arguing about whether something was fair or not. Can you believe that?”
At AES, revising the interpretation of a shared value required a leader who spoke for the entire organization to listen to the reasons for the proposed change, get advice from colleagues, and then decide if a change was appropriate.
I suspect that in most companies, especially ones that put a premium on individual freedom and diverse views, values are not really shared by the majority of the employees. The values either are adjusted frequently to suit changing situations, or they are defined so ambiguously that everyone can agree with them. As a result, they have very little effect on the behavior of the organization or the individuals who work there. They become especially irrelevant in times of trouble.
“Hey, Dennis, our organization has values too,” was a comment I sometimes heard from people outside our company. It was a helpful reminder that we were sometimes perceived as arrogant or even sanctimonious. Every person and every organization have values. But in this age of “tolerance,” it is politically incorrect to say that any of these values is more appropriate than others. The truth, however, is that some values are better than others. Truthfulness and selflessness, for example, are preferable to deception and selfishness.
Several articles I have read recently suggest that it doesn’t matter what purpose or set of principles you follow as long as you establish some set of standards for everyone to get behind. A friend of mine from California put this “all values are equal” philosophy in perspective when he recalled a conversation he had with a person he met on the beach. It concluded with, “Hey, that’s great. You’re into Jesus and I’m into surfing.” After hearing that story, I began to use the word “principles” along with the word “values” to describe the key concepts that guide organizational life. Principles connote less ethical relativism than values and more of the unchanging truths by which I believe we should live. The question is not whether we have values, but which values and principles really guide our behavior.
Since the early 1980s, many corporations have adopted values statements. Companies hang them on office and factory walls, post them on their Websites, and include them in their annual reports. The proliferation of values statements prompted one journalist to call them “a deodorant for self-interest.” There is often basis for cynicism. The values articulated by many companies have only a minimal effect on how they conduct their businesses. CEOs rarely talk about them at investor meetings. Try to think of a company that makes ethics one of its most important criteria for evaluating individual performance, calculating raises and bonuses, or awarding stock options. How often do principles drive the financial investments and operating strategy of a company? Paying lip service to values may be good public relations, but it is a hollow and cynical exercise. Values and principles mean something only when they affect everything we do, every day of the week.
My strong belief in shared values and principles does not mean that either AES or I consistently met the standards we set for ourselves. They were our aspirations, and they were deeply felt, but we were fallible like anyone else. At the same time, I resisted all efforts to lower our standards or to ease the burden of accountability that we imposed on ourselves. It was better to try our best, I felt, and be willing to come clean when we fell short of our goals.
In the early 1980s there was a small start-up company that shared office space with AES in Arlington, Virginia. The founders had designed clip-on neckwear for women to wear as an accessory to their outfits. After several false starts, the company leaders attended an industry trade show to see if they could market their bows. Somewhat to their surprise, they got orders for several thousand. When the president got back from the trade show, he came running into my office to tell me the good news. Then he paused and asked, “Dennis, how are we going to make all them bows?”
A year or so later, we were in much the same position at AES. Our power plant in Houston was under construction, and we were beginning to think about how to operate the plant. Most of us in the company had hardly seen the inside of a power plant, let alone worked in one. Board members who had significant industrial operating experience said,
